FC: EUROPEAN OPENING REPORT : TUESDAY – 27TH – FEBRUARY – 2018 February 27, 2018 at 05:33AM


US bourses furthered gains in the latter stages of Monday’s session with all major indices now down by just over 3% from all-time highs. Steel stocks outperformed, supported by hopes that US President Trump will impose harsh tariffs on imports. Trump did state that if it takes tariffs to bring back the steel industry, so be it. Investors also welcomed further declines in US government bond yields from last week’s multi-year highs, weighed by weak US new home sales and dovish remarks from St Louis Fed President Bullard. He argued that the natural, safe real rate of interest, and hence the appropriate policy rate, is relatively low and unlikely to change very much over the forecast horizon. We later heard from Fed Governor Quarles there are some upside risks to the economic outlook for the US, adding a sustainability of upturn in growth economically depends on an increase in investment and productivity. He said fiscal policy will likely spur increased growth over the next couple of years, including a boost to the economy’s potential capacity adding he believes a tightening labour market will feed through prices and wages. He mentioned it remains to be seen if higher growth would spur inflation. Elsewhere, speaking at his hearing to become ECB Vice President, Luis De Guindos said the ECB focusing on price stability has been successful. He also noted the ECB are in a different phase than the Federal Reserve but expects over time that their policies will converge.

Before the open in Asia, New Zealand posted a trade deficit of NZ$0.566 Bln (f/c NZ$0.0 Bln) in January as exports gained NZ$4.31 Bln (f/c +NZ$4.58 Bln) and imports rising NZ$4.87 Bln (f/c +NZ$4.60 Bln). The Kiwi Dollar fell sharply on the data release. Meanwhile, Australia’s weekly consumer confidence rose to 117.9.

Asian bourses traded mostly in positive territory after sharp gains on Wall Street. During the session, the BoK held its key rate steady at +1.50% in February, as expected, following the decision the KRW was largely unchanged. There were also remarks from Japanese Economy Minister Motegi, who said he expects consumer spending to continue to increase but will monitor the impact from rising consumer prices. Meanwhile, New Zealand Finance Minister Robertson said a strong NZ Dollar reflects a strong economy, adding the Kiwi Dollar is well regarded by markets. Robertson also stated business confidence will recover. In currency space, we saw slight weakness in the Greenback with the USD index marginally lower. Elsewhere, the PBoC set the yuan mid-point at 6.3146 against the Dollar and skipped OMOs.

Looking ahead, at 05:30 GMT, we get Dutch producer confidence, followed by Turkish economic confidence at 07:00 GMT and French consumer confidence at 07:45 GMT. Next at 08:00 GMT, we get German state CPI for Saxony, Spanish CPI and Swedish consumer & manufacturing confidence, followed by Sweden’s trade balance & household lending at 08:30 GMT. Then at 09:00 GMT, we get Euro Zone’s M3 money supply, German state CPI for Brandenburg, Hesse & Bavaria and Italian consumer & manufacturing confidence, followed by German state CPI for North Rhine Westphalia and Portuguese consumer confidence & economic climate indicator at 09:30 GMT. At 10:00 GMT, we get Euro Zone consumer, economic, industrial & services confidence, followed by the ECB MRO result at 10:30 GMT, then Irish unemployment and German state CPI for Baden Wuerttemberg at 10:00 GMT. On the speaker front, we look for possible comments from ECB’s Mersch at 08:40 GMT and Riksbank’s Jochnik at 09:00 GMT. On the auction front, Italy sells €4.5-6.0 Bln 2023 & 2028 bonds and €1.25-1.75 Bln 2025 CCT€Us at 10:00 GMT. Also of note, we get the Bundesbank annual report at 10:00 GMT.

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